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Daily Price Update 28/06/2017: fats driving EU dairy demand

This article is powered by Dairy Markets

Rising butter prices are having a knock-on effect on the European market, especially in countries under milk supply pressure.

Dutch and Italian spot prices have been rising sharply, to around EUR40 and EUR42 per 100 kilograms this week. And Arla Foods is raising its milk price to owners by two eurocents per kilogram from July 1. 

The change in tack is in the wake of the huge premiums places on butter, a trend which is now also creating push factor for whole milk powder (WMP) and cheese.

Arla director Jonathan Ovens said rise (following a reduction last month) reflects current market returns from rising fat prices.

He said: “The current market situation is characterised by strong demand and low stocks of fat, which is driving up prices for butter, cheese and other products containing fat.”

Ovens was reasonably upbeat, too, on powders, noting: “The market for protein is also firming, however at a low level.”

That low level has fluctuated, but skimmed milk powder (SMP) prices are now slipping, as can be seen from our latest price dashboard.

One stabilising factor for proteins, on top of rising fats demand, is weak milk output in two of the continent’s biggest milk producers, Germany and France. UK production is also below par. And Italy is in the grip of extreme heat and drought.

Earlier colder weather in Germany also had an impact, resulting in a lower than expected European ‘spring flush’ in April, May and June.

In the UK, lower milk volumes have helped create a set of robust rises, according to latest AHDB Dairy figures. Bulk cream prices climbed 21% in June to GBP2,370 from the previous month. This represents an astonishing 115% rise on the same month a year ago.

Butter is similarly up 18% in June to GBP5,100 (EUR5,783) per tonne. And SMP has edged up 10% from the average May price to GBP1,700 (EUR1,928) per tonne.

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